Proposed new brown coal allocations by the Victorian government

From Global Energy Monitor

Despite the failure of the 2002 Victorian coal allocation new start-up mining companies have been lobbying for a new coal allocation in the Latrobe Valley.

Exergen's billion tonnes bid for a new coal allocation

In December 2011 it was reported that Exergen was lobbying the state government for a coal allocation. Exergen's chief executive Jack Hamilton told the Latrobe Valley Express that the company, with support from Tata Power, could proceed with a demonstration plant but only if it gained secure access to a coal resource. "When we talk coal access, we’re talking commercial quantities that would support a project over a 30 year life span, through plant expansions and upgrades ... we need a billion tonnes of coal," Mr Hamilton said.[1]

Environment Victoria’s Mark Wakeham said Exergen's bid should be rejected. "Exergen has been spruiking this project for years; there’s been nothing to stop them from doing an agreement with someone commercial to get their project off the ground," Mr Wakeman said. "If they’ve got this product which they think is fantastic, then why aren’t they commercially developing it privately already? This would suggest it is economically unviable." Hamilton acknowledged that Loy Yang Power would have sufficient reserves but that negotiations on that front had stalled. “We’ve been in discussions on and off with Loy Yang, but haven’t been able to find a way to move forward; that doesn’t close the door as things progress,” he said.[1]

Baillieu government announces plan for new coal allocations

In March 2012 The Age reported that a draft cabinet submission proposed a new coal allocation process via tender to be completed by the middle of 2013. The report stated that Clean Coal Victoria would determine which areas would be up for tender. One part of the submission was a proposed $120,000 communications plan to "address community concerns about the ongoing use of brown coal in a carbon-constrained future" while also aiming to "increase industry interest in participating in the proposed allocation of brown coal". "Key messages" proposed to be delivered in the PR campaign include that "Victoria's abundant and easily accessible brown coal resource has helped keep electricity prices down and provided the Victorian economy a strong competitive advantage." Anticipating opposition from environmental groups, the plan stated that "an aggressive and pro-active communications campaign is required that demonstrates the continued relevance of brown coal in a carbon-constrained environment". Tim Piper, the Australian Industry Group's Victorian branch director, expressed support for new brown coal projects.[2]

Monash University's environmental mining engineer Gavin Mudd described the idea that brown coal could lower its emissions to match that of renewable energy as "a technological fantasy" while Caroline Bayliss from the Climate Group described it as akin to mining asbestos. "We have huge resources of asbestos in Australia but as a policy decision we've decided not to export that because of the potential ramifications of asbestos around the world. So maybe it's time that we actually made a decision along similar lines and leave some of this stuff in the ground and look for much more cleaner renewable resources," she said.[3]

O'Brien starts the sales job

At the time that The Age broke the story, Victoria's Energy Minister, Michael O'Brien was up-beat about the potential for brown coal. "Victoria has the second largest deposit of brown coal on the planet outside of Russia. There's more energy in our La Trobe valley than there is in the entire North West Shelf so there is great interest around the world in Victoria in brown coal; countries such as Japan, India and China, see a great opportunities to develop our brown coal into low emissions, higher value energy products and with that in mind we'll be undertaking, or seek to be undertaking, a new coal allocation," he told the ABC. [3]

The following week, O'Brien told Parliament that Victoria's brown coal deposits "constitutes over 500 years of usage at current rates." O'Brien stated that:[4]

"the nature of our brown coal, with its high moisture content, means that it cannot be exported in its natural state. Modern technology to dewater the coal and process it into higher value end products such as hydrogen, urea and fertiliser can also deliver much lower emissions. This provides an opportunity for value-adding in Victoria -- making higher value, low-emission products with Victorian workers in this state. That is the Victorian coalition government's goal -- to utilise our world-class brown coal to create higher value energy products, to deliver lower emissions, to deliver jobs and to deliver increased economic growth for Victoria."

O'Brien described the 2002 coal allocation process as a "bit of a dud" as the previous Labor government "at the time as part of its allocation had no requirement to actually develop the resource, to actually invest."[4]

To avoid a repeat of this, O'Brien pledged that the government would "soon undertake a market interest test. This test will inform the final design and timing of the coal tender process and the decision to proceed. However, I can say that the reaction to the government's announcement has indicated there will be strong interest indeed."[4] Shortly afterwards Tim Dillon, the Victorian government's Commissioner to South East Asia, was talking up Victoria's brown coal prospects at an international trade conference.[5]

Just prior to Christmas 2011 the Victorian government reclaimed the coal mining licence which had been allocated to Monash Energy -- a joint venture between Anglo American and Shell -- for the development of a coal-to-liquid project.[6]

Viability of a new allocation challenged

A report on the viability of the possible brown coal projects, commissioned by Environment Victoria, disputed the viability of any brown coal projects. "Even if our coal could be processed cheaply, we are at a major disadvantage compared to producers closer to Pacific buyers, such as Queensland, Indonesia or Mongolia," said the reports author, Rod Campbell. He said claims that new projects would create thousands of jobs were "utterly implausible".[7][8][9]

O'Brien delays new allocation

In December 2012 the Energy and Resources Minister, Michael O’Brien, announced a delay in a new coal allocation. "A recent market assessment confirmed local and international interest in the brown coal resource. The project will now move to a deeper market engagement process to further promote the development opportunity and to gain a more detailed understanding of market conditions and interest," he stated in a media release. While still up-beat about the prospects for further brown coal developments, he announced that "the Government expects to make an announcement on the next stage of this process in mid-2013."[10]

Megan Davison from the Minerals Council of Australia -- which has brown Victorian brown coal companies as members -- claimed that brown coal gasification could have a bright future "as gas demand in Victoria" would "soon" exceed production. Even so, she welcomed the delay while encouraging the government "to proceed with a tender in a timely manner to align with investment and demand cycles."[11] Environment Victoria’s Safe Climate Campaigner Victoria McKenzie-McHarg welcomed the delay, stating that “If the government is serious about securing long-term economic development for the state and the Latrobe Valley, they’ll leave the brown coal in the ground and get serious about investing in the development of clean energy technologies instead.”[12]

Articles and resources


  1. 1.0 1.1 Louis Nelson, "Lobby to open resources", Latrobe Valley Express, December 5, 2011.
  2. Tom Arup, "Baillieu set to boost brown coal", The Age, March 20, 2012.
  3. 3.0 3.1 Bronwyn Herbert, "Victoria announces plans to cash in on brown coal reserves", PM, ABC Radio National, March 20, 2012.
  4. 4.0 4.1 4.2 Michael O'Brien, "Energy: Brown Coal Initiatives", Hansard, March 28, 2012.
  5. Tim Dillon, "Initiatives and opportunities in Victoria's mining sector", Victorian Government, May 2012.
  6. Tom Arup, "Black mark for clean brown coal", The Age, August 13, 2012.
  7. Adam Morton, "Victorian coal success 'unlikely'", The Age, October 15, 2012.
  8. Environment Victoria, "Economic analysis concludes brown coal expansion a pipedream", Media Release, October 15, 2012.
  9. Rod Campbell, Economists At Large, "Undermined or Overburdened? Victoria’s brown coal: an economic perspective", October 2012.
  10. Michael O'Brien, Minister for Energy and Resources, " Initial market assessment confirms interest in Latrobe Valley coal", Media Release, December 18, 2012.
  11. Minerals Council of Australia, "La Trobe Valley Brown Coal allocation", Media Release, December 18, 2012.
  12. Environment Victoria, "Coal allocation delay good news for Victoria’s environment and farmers", Media Release, December 18, 2012.

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